# Thelma and Louie, Inc. started the year with a balance of retained earnings of \$545 million and ended the year with retained earnings of \$590 million. The company paid dividends of \$35 million to the preferred stockholders and \$75 million to common stockholders. Calculate Thelma and Louie’s net income for the year.

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Thelma and Louie, Inc. started the year with a balance of retained earnings of \$545 million and ended the year with retained earnings of \$590 million. The company paid dividends of \$35 million to the preferred stockholders and \$75 million to common stockholders.

Calculate Thelma and Louie’s net income for the year.

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Step 1

O = Opening balance = \$ 545 mn

C = Closing balance = \$ 590 mn

Total dividends paid = \$35 million to the preferred stockholders + \$75 million to common stockholders = \$ 110 mn

Let NI be the net income during the year.

Step 2

Connecting equation is:

O + NI - D = C

Hence, NI = C + ...

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